Growth in Gunung Kelir

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Growth in Gunung Kelir – The Opportunities & Challenges of Commercializing Gunung Kelir’s Herb Farming
Second Report by. Huw Hutchison

Introduction – Once the self-sufficiency of herb farming in Gunung Kelir has been assured, a number of exciting opportunities emerge for the project and it supporters. For the first time, they will be able to commercialize their produce, and begin supplementing their incomes with the rewards that their recent laboring and newfound expertise has afforded them.

This will be an exciting stage in the overall development of the herb-growing project for both Satunama and the community at large, but it is also a period inevitablyfraught with challenge. As a consequence, its prudent management is essential for the ongoing success of the project. For this reason, it is important that these challengesbe anticipated and accounted for, and a clear and coherent strategy be allowed to emerge. The resultant actions too, should be ones that enhance, rather than diminish, the community’s existing efforts.

This report sets about this task by outlining potential pathways that might be taken within the commercialization process, as well as their respective strengths and weaknesses. In doing so, it will attempt to consider both the specifics of the project in Gunung Kelir, and some of the broader issues involved in the commercialization process.

It must also be noted that the speculative nature of this report means that its discussion and recommendations may need to be reconsidered and amended closer to the time at which commercialization becomes viable. Up until that point, strategy may only be developed contingent to the market conditions of any given point in time.

The Key Considerations in the Process of Commercialization – There are three key criteria by which Gunung Kelir might measure their opportunities for commercialization against, namely:

  • Ensuring that the progress made through the herb-growing scheme is not distorted or diminished by the commercialization process. Instead, where possible, commercial ventures should be judged according to their ability to enhance and support the program’s existing focus on community development
  • The potential for commercialization to offer a sustainable, profitable business model for use by the community at large
  • The possibility for flexibility, to ensure that there is sufficient support for future growth and change in the program’s design and focus

The Key Challenges in the Process of Commercialization – Unfortunately, it is not uncommon for agricultural cooperatives to encounter major setbacks when looking to commercialize their operations. Three key problem areas in which challenges generally emerge are included below for further consideration. Alongside them appear recommendations on how best to mitigate the risks they impose upon a newly commercialized cooperative venture.

The Need for Appropriate Growth Development Cycles – First amongst these challenges is the need to properly anticipate and account for the unique growth development cycles of each individual venture. According to Sexton and Iskow (1988, p. 4), one of the most common mistakes made by those looking to commercialize cooperative schemes is that they undertake the commercialization process to quickly, or too vigorously, thus preventing the cooperative from developing the maturity necessary to sustain the stresses of commercial demands.

For Gunung Kelir, this issue is extremely pertinent to the long-term success of the project. Positively though, both Satunama and their community counterparts have consistently emphasized the importance of strong farming practices and community engagement, and made clear that they were choosing to take a slow and cautious approach to the overall venture’s growth trajectory. Maintaining this perspective while building overall project capacity will be vitally important to the ongoing success of this Satunama’s work in Gunung Kelir and the potential for this venture to become commercially viable in the long-term.

The Need for Market Analysis – Hitt et al. (2000, p. 451) also identify market analysis as a strong predictor for success inthe development of sustainable commercial ventures borne out of community projects. Without a proper understanding of what kind of market space they are entering, the herb-growers of Gunung Kelir remain susceptible to the influence of external factors. These factors, which might include changes in specific market prices or broader economic trends, make it difficult to adequately anticipate how a commercial venture might be carried out in an efficient and robust manner. This is especially true if they choose to expose themselves to the volatile Asian market place, relative to the stable growth trends of Indonesia as a whole over the past several years.

To best guard against the unpredictability of the commercial sphere, it might be useful for Satunama and their partners to run a series of detailed analysis into the best way to mitigate commercial risks moving forwards. An example SWOT analysis(categorizing project elements into strengths, weaknesses, opportunities and threats) has been included below as an example of one such analytical framework, and the many considerations that need to be accounted for in analysis.

Strengths Weaknesses
  • Diversified crops, leading to greater adaptability
  • Gunung Kelir is offering a unique product, with a compelling story
  • Gunung Kelir’s relative isolation from urban centers makes it difficult to engage in ongoing business negotiations

 

Opportunities Threats
  • Growing Chinese affluence and an appetite for alternative Asian medicines has seen a spike in jamu exports, with supply opportunities for Gunung Kelir

 

  • The increasing appeal of the herbal foods and medicines market may lead to an overabundance of suppliers, leading to depressed market prices

 

The Need for Product Diversification Strategies – It will be of little surprise to members of the Gunung Kelir community that an overreliance on one crop brings with it a number of risks. Single crop production strategies make growers susceptible to abrupt shifts in the market price of that good, adverse weather conditions and disease. On a number of occasions, the current reliance the sugar crop in Gunung Kelir has exposed the community to these and other risks. By developing this herb-growing project, one of the major benefits likely to flow to the community is a decreased reliance on a single crop, and it is important that this advantage is not discarded in the process of commercialization

One of the most impressive elements of the current herb-growingscheme is the immense diversity in the crop being produced. While this requires a certain level of sophistication from growers, it is also testament to the intrepid nature of the scheme and the dedication of those involved to understanding the importance of these plants. When moving the scheme towards commercialization and potentially scaling crops to better suit the needs of commercial partners, it may be tempting to reduce the diversity of the crop and focus on those plants that prove most profitable. To some extent, this is a natural and necessary process, but it is also important that there is an ongoing appreciation for crop diversity and the opportunities that this affords Gunung Kelir in the future.

Existing Models of Success – If an when Gunung Kelir chooses to commercialize their herb production, it is likely they will be doing so at an exciting time for this particular product class. There are a number of existing models for success that might be considered when planning for future eventualities.

AlterEco – AlterEco is a leading brand in the fast-emerging business of specialty foods. Having seen global success with its ethics-oriented business model, it’s currently looking to expand its business beyond quinoa into new crops. For AlterEco and their customers, the ‘story’ of the food is as important as the food itself. Their focus on crops that are equally compelling in their origins as they are in their flavor positions them on the cutting edge of food consumption in the West.

The community focus of herb-growing in Gunung Kelir make it an ideal match for a firm like AlterEco. In global terms, Satunama and community members in Gunung Kelir should recognize the immense desirability of their produce, and the potential marketing opportunities that this offers to the broader commercialization process.

A breakdown of some of the advantages and disadvantages of partnering with a firm like AlterEco is included below.

Advantages Disadvantages
  • Global health food partners are as invested in Gunung Kelir’s story as the community itself, meaning that it is in their commercial interest to maintain Satunama’s focus on community benefits

 

  • Potential for positive ‘flow through’ effects to Gunung Kelir’s sugar production, as another premium product. ‘Brand Gunung Kelir’ might be positioned to become desirable in its own right, and will lead to potential export opportunities for high quality sugar products as well as other herbal products
  • There is likely to be greater challenges with communication when working with international partners; be it language, cultural or otherwise

 

  • The scalability of the herb-growing scheme becomes of greater importance when working through large global firms. There are resultant risks from reductions in overall crop diversity

 

Deltomed – Deltomed, a large-scale domestic producer of herbal medicines, offers another potential commercial partner to Gunung Kelir. As with AlterEco, there exists a number of important advantages and disadvantages involved in this kind of a partnership, which are listed below.

Advantages Disadvantages
  • Proximity to production facilities and administrative offices will ease communication challenges

 

  • Negotiations can be carried out on a more equal footing, given the greater familiarity with the business culture of fellow Indonesians

 

  • Export possibilities remain viable, given the growth in Indonesian traditional medicines in a number of Asian markets, most notably China

 

  • Deltomed’s focus on jamu may better reinforce the cultural elements of Satunama’s scheme, relative to a food company
  • Scalability remains an issue, given that Deltomed employs industrial production processes

 

  • It may be difficult to find the correct balance between scalability and diversity, to ensure that the business model is sustainable and dynamic, as well as viable in its level of supply

 

  • Deltomed and similar producers are not commercially invested in the community development of Gunung Kelir in the same way that an international firm might be

 

Conclusions – Gunung Kelir sits on the precipice of an exciting new venture, as a project that may ensure the social and economic development for Gunung Kelir in decades to come. Its early progress is heartening, and makespossible the kind of ambitious thinking contained within this report. By maintaining a rational, holistic view of their opportunities for progress, Gunung Kelir and Satunama will maximize their chances of social and commercial success, and ensure that this program’s greatest strengths are able to grow and flourish in years to come.

 

List of Additional Resources

Alter Eco Foods Website, <http://www.alterecofoods.com/>.

Deltomed Website, <http://www.deltomed.com/en/home>.

Gunther, Marc. “Can Fast-growing Alter Eco Push the Envelope on Sustainability?” theguardian.com. Guardian News and Media, 04 Feb. 2014. Web. 05 Feb. 2014. <http://www.theguardian.com/sustainable-business/food-coop-cocoa-alter-eco-farmers>.

Hitt, Michael A., et al. “Partner selection in emerging and developed market contexts: Resource-based and organizational learning perspectives.” Academy of management Journal 43.3 (2000): 449-467.

Setiawati, Indah. “Turning Herbs Into Cash.” The Jakarta Post. PT. Niskala Media Tenggara, 22 May 2011. Web. 4 Jan. 2014. <http://www.thejakartapost.com/news/2011/05/22/turning-herbs-cash.html>.

Sexton, Richard J., and Julie Iskow. “Factors Critical to the Success or Failure of Emerging Agricultural Cooperatives.” 1988.

Suriyani, Luh De. “Herbs to Be Promoted.” The Jakarta Post. PT. Niskala Media Tenggara, 21 July 2010. Web. 5 Feb. 2014. <http://www.thejakartapost.com/news/2010/07/21/herbs-be-promoted.html>.

 

The University of Melbourne Australian Volunteers International
Growth in Gunung Kelir
The Opportunities & Challenges of Commercializing Gunung Kelir’s Herb Farming
Second Report
Huw Hutchison
539823
Community Volunteering for Change – Global
MULT30021

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